OREANDA-NEWS. July 25, 2013. Nordea Estonia, part of a leading European finance group, earned EUR 25 million in profits in HY 1. The international finance magazine Euromoney ranked Nordea the Best Bank in Nordic and Baltic countries; for the first time, Nordea also received the title of the Best Investment Bank in Nordic and Baltic countries.

"To be appointed best bank in general as well as among investment banks confirms that we are on the right track throughout the region. It confirms the sustainability of our relationship banking model, gives us confidence in developing it further and continuing to offer the best to our customers," Vahur Kraft noted. In addition, Nordea was also ranked the best M&A House and the best Debt House in the Nordics and Baltics, testifying to the bank's strengthening position among the largest companies and institutions in the region.

Continuing on a stable growth track. Eurozone economy is expected to turn to growth in 2014; this will be reflected both by increasing confidence in the real economy as well as increasing loan demand, which in Estonia has remained among the stronger ones in the Eurozone even today. „To develop and increase productivity, Estonian companies are in need of investments that would allow an increase in exports and ensure recruitment of qualified labour.  In addition to corporate investments and still active leasing finance to households, we see that the real estate market has long-term potential. It is benefiting from the favourable ECB base rate, increasing wages and people's wish to improve their living standards," Vahur Kraft commented on the outlook.

Although Nordea Estonia's income has decreased mainly due to record low base interest rates, the quality of the loan portfolio remains unchanged and household loan portfolio has shown a slight increase q/q.

„Nordea's relationship banking strategy in both Baltic and Nordic countries has helped us to increase customer loyalty (according to the Estonian Service Index (ETI), Nordea is the bank that has most improved its service level) and diversify sources of income. Although decrease in base rates has had the biggest impact on our income, we have managed to grow net commission income year on year.

Thanks to efficient use of resources and optimal cost level, we continue to demonstrate good cost/income ratio (38%).

Due to low base interest rates, customers are looking for alternative, higher-yield investment opportunities. Compared to a year ago, the volume of our savings and investment products has increased by 11%. The 9% rise in deposit volumes also reflects Nordea's efforts in strengthening Nordea's house banking relationship with our customers. By the end of Q2, Nordea Estonia held a total of EUR 1.2 billion worth of customer deposits, which has had a balancing effect on the deposit/loan ratio of our portfolio," Kraft said.

At the end of June, Nordea Estonia's loan portfolio amounted to EUR 3 billion.
Private loan and leasing portfolio grew 2% y/y and amounted to EUR 1 billion at the end of June.

At the end of June, Nordea Estonia's corporate loan and leasing portfolio amounted to EUR 1.9 billion, which gives Nordea a stable second position in Estonian corporate lending market.

Quality of Nordea's credit portfolio is still the best in the market, ratio of loan losses to the entire portfolio was 0.01% in Q2.

Nordea Leasing (Nordea Finance Estonia) has had a successful HY1. Nordea's leasing portfolio has grown by nearly 14% y/y, amounting to EUR 600 million. Factoring and stock financing have also shown good sales numbers and portfolio growth; the combined impact on leasing portfolio has generated 22% year-on-year growth. The quality of the leasing portfolio remains excellent with credit losses amounting to 0.06% of the portfolio. In the first half-year, Nordea Leasing issued EUR 161 million worth of new credit.

By the end of Q2, the volume of pension funds managed by Nordea Pensions Estonia AS had increased by 4.3%, compared to the 1.8% growth of the pension fund market as a whole. Compared to the same period in 2012, Nordea pension funds' asset volume has increased by 39.6%. Since May 15, Nordea is accepting applications for an increase in II pillar payments and as at of the quarter, about 10% of Nordea pension fund customers have opted in favour of this.

Nordea Bank has received a number of international awards this year. In July, the international finance magazine Euromoney awarded Nordea the title of Best Bank in Nordics and Baltics. For the first time, Nordea also received the title of Best Investment Bank in the Nordics and Baltics. Euromoney awards are based on an assessment of the bank’s development of services and products, how the bank adapts to the new regulation of the financial sector as well as the bank’s results.

Comment on Nordea Group results:

Strengthened customer relations, flat costs and higher capital

Group CEO Christian Clausen's comment to the report:

“In the uncertain macroeconomic environment, we continue to deliver on our plan on income initiatives, cost efficiency and improved capital position.  In the second quarter, 23,000 new relationship customers were welcomed to Nordea and we have reinforced our position as the leading corporate bank in the Nordics and Baltics. The recently published Prospera survey shows that large companies in the Nordics rank us the best bank in the Nordics, which was confirmed by the Euromoney awards “Best Bank” and “Best Investment Bank” in the Nordics and Baltics.
Total expenses have been unchanged for 11 consecutive quarters.  Core tier one capital ratio improved to 14.0% and the pro forma Basel III core tier 1 capital ratio is at least 14.0%.

We see a continued stabilisation of our credit quality.  Loan losses declined to 22 basis points in the second quarter 2013.  Loan losses in Denmark and shipping declined.”

Half year 2013 vs. Half year 2012 (Second quarter 2013 vs. First quarter 2013):

Total operating income unchanged (down 1%)  

Operating profit unchanged (up 1%)   

Core tier 1 capital ratio up to 14.0% from 11.8% (up from 13.2%)  

Cost/income ratio up to 51% (down to 50%)  

Loan loss ratio of 23 basis points, down from 24 basis points (down to 22 basis points)  

Return on equity 11.3%, down from 12.1% (up to 11.5% from 11.1%)

A full-length overview of Group results may be found here:  http://mb.cision.com/Main/434/9442721/143337.pdf